Traditionally, banks have tried to industrialize only their most highly commoditized and least strategic functions such as F&A and customer care which involves routine, repetitive back-office services or low-touch front-office services. The new reality of the industry is now forcing banks to reconsider how they allocate resources within an optimal operating model.
Case in point, a few forward-thinking banks are applying the Global Business Services (GBS) model to advanced operations that have the potential to offer incredible customer insight – operations like customer-channel analytics, customer segmentation, retention offer analytics and social media management. These banks identify triggers and events from customer data and develop algorithms to target event-specific messages to customers. And predictive analytics help banks to be more effective in advertising and marketing campaigns, as well as help pursue targeted and customized up-sell and cross-sell techniques.
[Check Out the First Part of Our Series: Why Industrializing Operations Could Save Banks]
In the realm of social media where there is a deluge of data, the impact of implementing a GBS model can have significant consequences. Banks are using GBS to help track what customers and potential customers are saying on social media and to respond just as quickly – either by reaching out directly to customers, or by transforming product lines or business strategy to satisfy specific customer segments.
And they’re not just reacting to social media. Banks have begun using social media in a more proactive manner in an effort to strengthen the brand. Dedicated teams within a shared service center monitor the social media presence of the brand and improve the customer experience by reaching out to customers through appropriate channels and providing insights for product development.
Despite the seeming ease that these leading companies may be able to achieve this customer insight, GBS requires a structured, methodical approach. Broad brush strategies and benchmarks alone won’t cut it. If the rest of the banking industry wants to follow in the footsteps of these forward thinkers, it will need to achieve an in-depth, almost scientific, understanding of its business processes by following these seven steps:
1. Review as-is state and rationale. Understand the current state of performance, identify candidates for improvement, and review the process and sub-process practices.
2. Identify top improvement opportunities. Use best-practice metrics and frameworks to benchmark key areas, identify top areas for improvement, assess the feasibility and risk of options, and conduct a preliminary analysis of benefits such as cost, efficiency or effectiveness.
3. Identify delivery alternatives. Assess options for consolidating processes into internal global shared operations, externally sourced operations, or a combination of both.
4. Determine change implications. Outline both financial and risk-related implications for each location and structuring option (e.g. various types of risk).
5. Build a business case for each alternative. If needed to help with executive decision-making, compile a high-level business case that encompasses process improvement, organizational structuring options, location choices and change implications.
6. Develop a detailed roll-out plan. Develop a roll-out plan to reach a targeted operating model by process and by location.
7. Build the final business case. Identify emerging options for each process and develop financial and implementation plans.
As banks continue to cope with seismic shifts in their markets and customer base, the ability to adjust their business models will be a key factor for future success. Empirical experience and a significant level of granularity can help craft the right strategy for a target operating model. A methodical approach might take longer than some are willing to expend. But as forward-thinking banks have discovered, the long-term benefits outweigh the costs.
Rick Seaberg is the global banking and financial services and Americas business development leader at Genpact.